The FY14 results continue to reinforce Sydney Airport as a stand-out name in the infrastructure space
Key Points - Sydney Airport’s FY14 results are very strong, with the company delivering 6.1% annual growth in EBITDA to $948m, off the back of 4.3% revenue growth and 1.7% passenger growth
- All key business segments performed strongly, with the largest revenue growth in the retail and car parking businesses
- Cash flow coverage has improved by 0.1 times to 2.3 times interest cost, while the average debt maturity lengthened by 2 years to 2022
Key Highlights
- Revenue was up 4.3% to $1.164bn, with good growth across all key business segments
- Aeronautical: revenue up 4.9%, 2.8% international passenger growth driven by Asian passenger traffic and a robust Australian market
- Retail: revenue up 5.6%, passenger spend rates increased by 8.2%
- Property: revenue up 3.6%, occupancy at 98%
- Car parking: revenue up 5.7%, online bookings now accounting for 29% of revenues
- EBIT was up 4.8% to $621.9m, NPAT up 42% to 59.1%
- $3.1bn refinancing completed, average debt maturity lengthened by 2 years to 2022, refinancing all bank facilities maturing over 2014-2017, average cash interest rate of 6.1%
- Cash flow coverage ratio up 0.1x to 2.3x
- In relation to the Western Sydney Airport, the company is ‘fully committed’ to the consultation process with the Government. The consultation period continues until June 2015, after which the Commonwealth will have a period of consideration (unknown) and thereafter may issue Sydney Airport a notice of intention setting out the material terms of the development and operation of the Western Sydney Airport. Sydney Airport will then have a further 4-9 months to consider exercising the option. On that time, Sydney Airport is likely to make their decision in the second half of 2016
Commentary
The FY14 results continue to reinforce Sydney Airport as a standout name in the infrastructure space. Revenue growth in retail and car parking exceeded aeronautical revenue growth, further increasing the diversification in its earnings base.
With the weakening in Australian currency, we expect to see continued solid growth in international passengers, which will further drive retail passenger spend growth.
The debt maturity profile is being managed pro-actively in light of favourable borrowing conditions. The company debuted EUR700m and 14/15 year US PP issuances over FY14, further diversifying its sources of funding.
Cash flow coverage of 2.3x is now within the upper range of the company’s rating tolerance (2.3x – 2.5x).